Sivasankar Bail- No Predicate Offence Made Out, PMLA Proceedings Not Maintainable: Sr. Adv Jaideep Gupta Tells Kerala High Court

Senior Advocate Jaideep Gupta appearing on behalf of the former Principal Secretary to the Chief Minister of Kerala argued before a Bench of Justice Ashok Menon that no case was made out against Sivasankar.

Gupta submitted that whereas Sivasankar was first arrested on the allegation of gold smuggling, the authority, without any basis, now alleged that the proceeds of crime were 'kickbacks' from the LIFE Mission contract in exchange for confidential information about the project.

The IAS official was arrested by the Enforcement Directorate on October 28 for offences under Sections 3 and 4 of the Prevention of Money Laundering Act for allegedly assisting Swapna Suresh, the prime accused in the gold smuggling case, to launder the proceeds of the crime.

No predicate offence

In this context Gupta argued that the 'predicate offence' itself was changed as the authority alleged commission of a completely different offence.

"You cannot proceed against a person on the basis of an underlying offence. What is the predicate offence," Gupta rhetorically remarked.

Referring to Section 3 of PMLA, Gupta submitted that an offence of money laundering is said to be committed when a person is actually involved in any process or activity connected with the proceeds of crime.

Further, he referred to Section 2(u) of the Act which defines 'proceeds of crime' as property derived as a result of criminal activity relating to a 'scheduled offence'.

In this backdrop Gupta submitted, "There has to be a predicate offence from which proceeds of crime arise, that money needs to be touched by the accused to be prosecuted".

He further argued, "If you don't identify the crime, how do you know it is a 'Scheduled Offence' under the PMLA from which the proceeds of crime came?"

No proceeds of crime

Gupta further denied ED's allegation that Sivasankar helped Swapna to park the proceeds of crime. He submitted that merely because the two were social acquaintances would not mean that the former helped the latter in committing the offence.

ED had alleged that Sivasankar arranged a flat for Swapna to park the proceeds of crime. In this context, it had presented the Whatsapp conversation between Sivasankar and his CA, one Venugopal.

Denying the allegations, Gupta submitted that correspondence did not disclose anything suspicious and merely because Sivasankar sought to arrange an accommodation for Swapna, would not mean that the same was to keep the proceeds of crime.

He read out an excerpt of the impugned Chat and submitted that there is no economic offence in a friend helping another to look for a house.

'It must be seen that they are socially familiar & this is natural behavior,' Gupta said.

Proceedings under PMLA not maintainable

Gupta argued that since the ED has failed to define a predicate offence and has been unable to establish Sivasankar's connection with the proceeds of crime, the offence under the Money Laundering Act is not yet complete and the criminal proceedings against him are not maintainable.

He submitted that Sivasankar's alleged involvement in the LIFE Mission case was also baseless as that project was a private contract between UAE Red Crescent and Unitac Builders. "How are they saying that a government servant received kickbacks from a private contract?" Gupta remarked.

He pointed out that the LIFE Mission project had its own CEO, who was a senior IAS Officer and the project was merely supervised by the Chief Secretary. He further submitted that the contract was awarded after a public tender and all the information pertaining to it was in public domain.

"Why would anyone give money for information that is already available in the public domain," Gupta said while denying the allegations of bribery and argued that there are no reasonable grounds to hold Sivasankar responsible for anything.

Section 45 manifestly arbitrary

Coming to the arguments on point of law, Gupta argued that the twin condition for bail under Section 45 of the PMLA is 'manifestly arbitrary'.

He referred to the Supreme Court's verdict in Nikesh Tarachand Shah v. Union of India where it was declared that the provision, insofar as it imposes two further conditions for release on bail, is unconstitutional as it violates Articles 14 and 21 of the Constitution of India.

The conditions were that the Public Prosecutor must be given an opportunity to oppose any application for release on bail and the Court must be satisfied, where the Public Prosecutor opposes the application, that there are reasonable grounds for believing that the accused is not guilty of such offence, and that he is not likely to commit any offence while on bail.

Gupta submitted that even though the provision was amended in the year 2018, the basis on which the section was declared unconstitutional has not been changed and the arbitrary conditions still persist.

No bar on granting bail to Economic offenders

Coming to the question of bail in cases where the allegations pertain to commission of economic offences, Gupta submitted that even though it has been held that special circumstances must be shown to release the accused on Bail, a latest order in this area paves way for grant of bail.

He referred to the Supreme Court's verdict in the case of P. Chidambaram v. ED, whereby it was opined that if the presence of accused for trial can be ensured, bail should be ordinarily granted.

He quoted from the Judgment,

"...even if allegation is one of grave economic offence, it is not a rule that bail should be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so."

On November 17, the Special PMLA Court at Kochi had dismissed his bail application observing that it was too early to record that there are reasonable grounds to believe that he is not guilty of the offences.

The case relates to the seizure of 30 kg of 24 carat gold worth ₹14.82 crore at Thiruvananthapuram airport on July 5 by the Customs (Preventive) Commissionerate, Kochi, which was sought to be brought through the diplomatic consignment sent to UAE consulate at the State capital.

Sivasankar came under the cloud of suspicion on account of his connections with the prime accused in the gold smuggling case, Swapna Suresh and P R Sarith.

In the present bail application, Sivasankar said that the lower court's denial of bail was solely based on a purported statement given by the prime accused Swapna Suresh, where she had said that he was aware of her gold smuggling activities.

In this context Gupta submitted that in none of the previous eight statements given by Swapna, she had implicated Sivasankar. He emphasized that the first statement about Sivasankar's alleged involvement was made after her arrest and thus, it was neither credible nor admissible under Section 50 of PMLA.

After the reports about gold smuggling surfaced in the media, the state government suspended him from service last July for alleged violations of conduct rules.